Stricter Management Oversight over Supply Chain: Industry Trend Here to Stay?

On June 18, 2012, Digitimes reported that Apple will place higher quality restrictions on supply chain management, instituted by new CEO Tim Cook. If you recall, Tim Cook was COO who also oversaw the company’s supply chain overhaul, so he knows a thing or two about SC management. What is interesting is that there had been a lot of noise regarding Apple’s suppliers in China, their ways of not managing human resources/worker safety, workplace health, etc. Since Apple is the world’s most valuable company, commanding a huge lead in market attention in the sectors they play in and the breadth of high technology supply chain extending from Americas to Europe to Asia, Tim Cook’s actions are gaining a lot of attention. As part of the supply chain oversight, the stricter management includes more rigorous inspections, greater frequency of inspections, evaluation of their worker treatment and instituting better processes for the suppliers to follow. What’s more: this data is distributed and published as part of their Environmental Health & Safety (EH&S) corporate responsibility.

This adds costs initially, however, yields higher quality output, better aligned suppliers and ultimately brings the incremental costs down. Apple is paving the way for other multi-nationals, electronics and industrial manufacturers with global supply chain footprint so they also can be effective in instituting supply chain management.

Let’s look at what these actions have raised:

- Increased inspections: greater frequency and more rigorous/longer inspections help find problems ahead of products reaching the market, thus, avoiding costly recalls, repairs, warranty costs as well as brand reputation.

- Higher standards: When a company prides itself as a purveyor of superior quality products, that value should extend to its suppliers as well. Grooming the suppliers to adopt higher standards over product quality eliminates poor suppliers or the ones who cannot meet the greater threshold of expectations.

- Management visibility: For management to be aware of what is going on with global suppliers that provide high value, critical items or assembly and logistics services, it is very important to make the right decisions as to which suppliers require development, which suppliers are reaching risk parameters beyond control and which suppliers can be part of future new product.  Supply chain is a critical part of the management decision making process and availability of data in near real time is essential.

- Trend setting: Apple is in a position to not only to enforce stricter control over the suppliers, but also to include quality as part of the supplier quality management. This cuts costs and helps develops better suppliers providing highest quality yields.

To realize these ground breaking business practices, one needs to have a tehcnology solution that provides the following:

- Harmonized, centralized and automated business processes that are used by the suppliers based on the parent company’s best practices. Appropriate data must be captured, appropriate checks and controls should be followed and appropriate personnel notified upon trigger based conditions.

- A system that provides management decision-making information in a usable manner in real time for effective visibility and management. Typically, the critical information should be pushed through specific dashboards.

- Suppliers should have appropriate visibility to their critical information, so they know when they are expected to respond, when they are expected to remedy a situation before it becomes a critical roadblock. They should have specific dashboards and interface, which effectively becomes an extended enterprise system.

- Business intelligence should be available that would allow both suppliers and management decision makers ability to query, ask what-if questions and be able to do look ahead and decision making analysis. This provides a greater level of information for effective decision making. The BI component should open up the visibility into supply chain to help management decide when to increase oversight, when to relax oversight, which suppliers to drop, which suppliers to develop into strategic partners, which new suppliers to onboard, etc.

These are critical elements of best-in-class supply chain management that will help cut or manage costs and deliver highest quality products.

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